Everybody dreams of going to the best institutions for their higher studies. However, the expense of college is likely to be one of your main obstacles in pursuing your dream. Thanks to education loans, you may, fortunately, pay for your education. But there are several things you should look at before you apply for an Education loan.
Before applying for an education loan, you should take into account the following 8 factors.
- Criteria for Qualification
Check the lender’s qualifying requirements before applying for a student loan. Various lenders have varied qualifying requirements, which may include factors like age, income, credit score, academic background, and the course you intend to take. Before applying for the loan, make sure you meet the requirements.
- Rates of Interest
When applying for a loan, the interest rate is a crucial consideration. Lenders may charge different interest rates, which may be either fixed or fluctuating. A floating interest rate changes depending on the state of the market, whereas a fixed interest rate stays the same for the course of the loan. To save money in the long term, it is essential to select a lender with a lower interest rate.
- Amount of the loan
You must estimate the whole cost of your education, including tuition, living expenses, and other costs, before applying for a student loan. This can help you determine how much money you’ll need to borrow in loans. Make sure the lender you chose can provide you with the appropriate loan amount because different lenders have different loan restrictions.
- Loan Term
The loan tenure is the time frame over which you will repay the loan. A longer loan term can lower your monthly EMI (Equated Monthly Instalment), but it can also raise the total interest you pay throughout the life of the loan. A loan with a shorter term may have a higher EMI but a lower total interest paid. You must select a loan term that is appropriate for your financial circumstances.
- Options for Repayment
Before applying for a loan, you should investigate the lender’s repayment choices. Some lenders may enable you to begin repaying the loan once you have completed your schooling, whilst others may force you to begin repaying immediately. Some lenders may also provide flexible repayment options, such as a moratorium period, in which you can postpone loan payments for a set amount of time. Choose a lender that offers repayment alternatives that are appropriate for your financial circumstances.
- Collateral Conditions
Most school loans need collateral as loan security. The collateral can be a property, a fixed deposit, or any other asset. Before applying for an education loan, you should review the lender’s collateral requirements. Some lenders may also provide unsecured loans, however, the interest rates may be higher.
- Fees for processing and other charges
You should look into the lender’s processing costs and other charges during the process. The lender will charge processing costs for processing your loan application, and other expenses may include prepayment penalties, late payment penalties, and foreclosure penalties. Before applying for a loan, be sure you understand all of the fees involved.
- Lender’s Standing
When applying, it is crucial to assess the lender’s reputation. You should select a lender with a strong reputation and a track record of offering great services to its clients. You can learn about the lender’s reputation by reading online reviews and looking at its ratings on financial websites.
Depending on the parents’ income, the government may occasionally offer a subsidy for loan repayment. There are several plans for reducing interest rates. Many banks offer discounts on borrowing rates, particularly for female students, according to a Bank representative.
Despite the availability of several educational loans, non-repayment may be of issue if one’s employability is low. “When a student asks for a loan, he/she must be 100 percent certain that he can pay back his monthly instalments once the course is through. Remember that the loan must be paid back with interest at the end, which is expensive. Therefore, it will be best if the student begins debt repayment sooner rather than later after completing their study.